1. THE PAY MODEL
Chapter 2

2. The Flow….
Concept
Forms of pay
Pay model
Case study

3. Something that counterbalances, offsets, makes up for something else.
Compensation????
Society
Stockholders
Managers
Employees
Something that counterbalances, offsets, makes up for something else.
Refers to all forms of financial returns and tangible services and benefits employees
receive as part of an employment relationship.

4. Total returns for work Forms of pay Relational returns
Recognition & Status
Employment security
Challenging work
Learning opportunities
Total compensation
Cash compensation
Base
Merit/Cost of living
Short-term /long term incentives
Benefits
Income protection
Work/life balance
Allowances

5. Base wage--- the cash compensation that an employer pays for the work performed. It tends to reflect the value of the work or skills and generally ignores differences attributable to individual employees
Merit increase ---- are given as increments to the base pay recognition of past work behavior. Cost of living allowances give the same increases to everyone, regardless of performance.

6. Incentives
Merit pay
Do not increase the base wage and must be re-earned each pay period
Size of incentive will be known before-hand
Tries to influence future behavior whereas merit recognizes past behavior
Merit pay programs evaluate past performance of an individual and then decide on the size of the increase

7. Benefits Income Protection Work/life balance
Medical insurance, retirement programs, life insurance, and savings plans are common benefits.
Work/life balance
Programs that help employees better integrate their work and life responsibilities include time away from work (vacations) access to services to meet specific needs (drug counseling, financial planning, referrals for child and elder care), and flexible work arrangements (telecommuting, nontraditional schedules, nonpaid time off) responding to the changing demographics of the workforce (two-income families or single parents)

8. A Pay Model TECHNIQUES POLICIES OBJECTIVES INTERNAL STRUCTURE
Work Analysis
Description
Evaluation/Certification
INTERNAL STRUCTURE
EFFICIENCY
Performance,
Quality,
Customer & Stakeholder
&
Cost
FAIRNESS
COMPLIANCE
ALIGNMENT
Market definitions
Surveys
Policy lines
PAY STRUCTURE
COMPETITIVENESS
Security based
Performance Based
Merit Guidelines
INCENTIVE PROGRAMS
CONTRIBUTIONS
Cost
Communication
Change
EVALUATION
MANAGEMENT

9. Compensation objectives
Efficiency
(a) Improving performance, increasing quality, delighting customers and stockholders, and
(b)controlling labor costs
Fairness
Fair treatment for all employees by recognizing both employee contributions (For e.g. higher pay for greater performance, experience , or training) and employee needs (e.g. fair wage as well as fair procedures)
Compliance
Conforming to federal and state compensation laws and regulations

10. Continued… Objectives guide the design of the pay system.
If objective is to increase customer satisfaction, then incentive program and merit pay might be used to pay for performance
If objective is to develop new innovative products – job design, training and team building may be used.
Also serve as the standards for judging the success of the pay system

11. Policy choices…. Internal alignment External competitiveness
Pay mix???
Positioned??
What forms??
Employee contributions’
Management
So what?

12. Internal alignment
Refers to comparisons among jobs or skill levels inside a single organization.
Pertains to the pay rates both for employees doing equal work and for those doing dissimilar work
Determining an appropriate difference in pay for people performing different work is a key challenge facing managers

13. External competitiveness
Refers to comparisons with competitors
How much do we wish to pay in comparison to what other employers pay?
What mix of pay forms – base, incentives, stock, benefits do our competitors use?
Market driven…
EC has two –fold effect on objectives
Ensure that pay is sufficient to attract and retain employees,
control labor costs…

14. Employee contributions
How much emphasis should there be on paying for performance?
Should the company share profits with employees?
Share with all employees, part-time as well as full-time?
Management
Ensuring that the right people get the right pay for achieving the right objectives in the right way

15. Techniques…. Internal structure Pay structure Incentive programs
Evaluation……….

16. Case study
Glamorous internships? or House Elves?